The Private Equity for Families Blog

LP Co-Investments—a “Win-Win” Proposition and an Emerging Trend

Assets under management in private equity funds continue to grow and so does the desire for LP’s to see co-investment opportunities alongside these funds. Generally reserved for the most important investors, many fund managers have entered into

these arrangements to get proprietary deal flow, deep industry expertise, exceptional portfolio governance or large fund commitments from its LPs. A typical co-investor would not pay management fees or carried interest on the “sidecar” amount. A recent study by Fitch shows that notwithstanding the revenue impact to fund sponsors, these arrangements are popular and have had an “overall neutral impact to the sector” (see article:  Direct, Co-Investments Drive Shifts In Private Equity).

Family investors with the same co-investment objectives might be surprised to learn that their family’s expertise and connections within an industry are enough to obtain co-investment rights.  Investing in a series of smaller funds, for example, may allow them the opportunity to put more money to work with lower actual committed amounts, lower fees and lower carried interest payments all of which should drive higher overall returns and more freedom to “pass” on a sidecar opportunity.

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Rob McCreary

Rob McCreary has more than 40 years of transactional experience as an attorney, investment banker and private equity fund manager, and has spent his career in building entrepreneurial organizations with successful track records Founder and chairman of CapitalWorks, he is responsible for developing and maintaining senior relationships with investors and portfolio governance.

This blog represents the views of Rob McCreary and do not reflect those of CapitalWorks or its employees. This blog is not intended as investment advice. Any discussion of a specific security is for illustrative purposes only and should not be relied upon as indicative of such security’s current or future value. Readers should consult with their own financial advisors before making an investment decision.

Private Equity for Families Blog | CapitalWorks Private Equity Cleveland Ohio

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